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BIS call for evidence on improving consumer switching

On 25 May 2016, the Department for Business, Innovation and Skills (BIS) issued a call for evidence on improving the consumer landscape in the energy, communications, water and transport sectors and on making it quicker and easier for consumers to switch providers. This latest call for evidence builds upon earlier work undertaken by the Government in relation to (i) the consumer landscape and (ii) switching, but is the Government’s first step towards making switching quicker and more consistent across all major services by setting out proposals which could allow consumers to switch providers on seven days or less.

The issue of the call for evidence coincides with the publication of the Government’s response and next steps-action plan on the October call for evidence on switching principles.[1]

The Consumer Landscape

The Government has decided that the time is right to look again at whether the provision of advice, advocacy and dispute resolution in the energy, communications, water and transport sectors (including bus and roads sectors) can be made to work better for consumers and whether more can be done to make data on consumer complaints more readily available and to enable more consumers to get more of their money back when they have suffered detriment in these markets.

The main areas that BIS considers require improvement include:

Consumer advice - The Government recognises that at present, there are a number of different bodies in these sectors responsible for offering consumer advice and information. The Government is concerned that, by having a number of different sources and routes to advice, there is a risk that roles overlap, with scope for confusion and inconsistency in the advice consumers are given.

Consumer advocacy - It is recognised that effective consumer advocacy is about representing consumer interests and promoting consumer rights with the power to change things. The Government is keen to know whether there are problems with the current advocacy landscape and if so, how it can be improved.

Consumer Data - The Government would like to know whether data on consumer complaints can be made easier to access and more widely available. Beyond complaints data, the Government would like to understand whether the “reputation data” earned by a user on a platform could be used to help platforms win business or prove their trustworthiness in other contexts.

Enforcement of Consumer Law - The Government is keen to receive evidence and better understand if more can be done to get consumers their money back and give them information on a business’ past performance when consumers have suffered detriment.

Consumer Switching

In October 2015, the Government published six switching principles in a call for evidence on switching principles.[2] The six principles were aimed at setting out an overarching set of aspirations and standards across energy, telecoms and current account switching, recognising that they may also apply to wider products. In November 2015, the Government announced a package of commitments aimed at improving switching in its policy paper entitled “A better deal: boosting competition to bring down bills for families and firms” (Better Deal)[3] and over the last nine months, has been holding roundtables and discussions with regulators and industry leaders on potential barriers to implementing the switching principles in different sectors.

This new call for evidence marks the Government’s first step towards consistently quicker switching across all major services by setting our proposals which could allow consumers to switch providers in seven days or less. The seven-day period would commence when the consumer gives their consent to switch to the new provider, and the new provider accepts that customer.

The Government recognises at present there is no consistency between sectors on how long it takes to switch from one service provider to another. For example, mortgages typically take between four to eight weeks to switch providers, whereas it can take just one business day to switch mobile phone providers. Different products and services can influence the time it takes to switch providers and the call for evidence aims to understand the specifics of switching across different sectors, including what processes are in place to ensure a secure and reliable switch, how quickly that switch can take place and what forms of redress would be appropriate to compensate consumers if a switch goes wrong.

This new switching proposal would also complement other work undertaken by the Government to facilitate improvements in the switching process.

In the communications market, the Government intends to legislate through the Digital Economy Bill to make switching quicker and easier.

In the mobile phone market, the Government recognises that the cost of unlocking phones may deter customers from switching. In a Better Deal, it was recognised that consumers can face costs of up to £20 to unlock phones and the Government called upon industry to take action. Since then most mobile operators have voluntarily committed to unlock phones for free at the end of the contract.

In energy, the Government has recently worked with Ofgem, suppliers and other industry partners to enable domestic energy customers to switch supplier within 21 days, half the time it previously took. The Government is working with Ofgem and industry to take steps to reduce this timeframe to ‘reliable next day’ switching with an ambition to do this by the end of 2018. The Government has published draft legislation for pre-legislative scrutiny that would strengthen Ofgem’s powers to coordinate and deliver these reforms.

In the banking sector, the Current Account Switch was launched in September 2013 and since then has processed 2.8 million switches, 99% of which were completed in the seven-day target.

Aside from quicker, more consistent switching, the Government would also like to explore switching. fees and other ways to make the process easier for consumers and to improve consumer choice including requiring that customers should be able to cancel contracts online if they signed up for them online.

What are the implications for industry?

The call for evidence will close on 23 June 2016. Following the end of the call for evidence, BIS will assess responses and consider what changes to the consumer landscape and switching should be included in the Better Markets Bill later this year.[4]

The call for evidence therefore represents an opportunity for companies and regulators to articulate their standpoint in advance of any potential legislative action. In particular, companies should consider whether the seven-day target is achievable in practice and what internal and external barriers exist that would hamper such a timeframe.

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